The perils of first-order conditions of New Keynesian models

Kim, Minseong (2016): The perils of first-order conditions of New Keynesian models.

Abstract

For deriving equilibrium of sticky-price/monopolistic competition New Keynesian models, first-order conditions are often used. This paper shows that they may not be sufficient and presents a case out of a simple model where there exists no equilibrium. This is true even when Taylor rule is assumed.

• Item Type: MPRA Paper
• Language: English
• Keywords: New Keynesian, sticky price, monopolistic competition, consistency, first-order conditions
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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